Tax and VAT
VAT, self-employed tax and what you can claim, explained with worked examples.
How to calculate freelance taxes: a step-by-step guide
Self-employment tax catches many new freelancers off guard. Here is exactly what you owe, when you owe it, and how to set aside the right amount from every payment.
1099 threshold 2026: what changed for freelancers
Clients now send a form only at $2,000, and payment apps only above $20,000. What that changes for you, and the tax you still owe without a form.
Can ChatGPT do bookkeeping? We tested it
We gave ChatGPT 30 transactions five times. It never mistook a tax payment for an expense, but its results ran from a $737 loss to a $2,406 profit.
VAT on ChatGPT: do you pay it, and can you reclaim it?
Who pays the 20% VAT on ChatGPT, how to add your VAT number, and how the reverse charge nets to zero on your UK VAT return.
Can you claim ChatGPT as a business expense in the UK?
HMRC's rule for AI subscriptions, what claiming ChatGPT saves at basic and higher rate, which Self Assessment box it goes in, and why employees usually can't claim.
Can you use AI to do your taxes? What's safe and what isn't
Yes for sorting receipts and explaining forms, no for filing blind. What's safe, what never to paste into a chatbot, and what the IRS now expects from accountants who use AI.
Are AI subscriptions tax deductible?
Yes, if you're self-employed and use them for work. What a ChatGPT or Claude plan really saves you, how to split mixed use, and the Schedule C line most guides get wrong.
Is the VAT flat rate scheme actually worth it?
It looks like free money for freelancers. Since 2017 the limited cost trader rule at 16.5% means it often isn't. Here's how to tell which side you're on.
How much does an employee actually cost?
An employee costs 1.25 to 1.4 times their salary once employer taxes, benefits and overhead are counted. Here's where the extra money actually goes.
How to add VAT to a price (and how to remove it)
Adding VAT is a one-step calculation. Removing it from a VAT-inclusive total takes one more. Both formulas explained with worked examples.
Which rules apply to you
Tax depends on where you're based, so each post here is written for one system. The US posts follow the IRS: self-employment tax, Schedule C and, for employers, payroll tax. The UK posts follow HMRC: VAT and Self Assessment.
Newly self-employed in the US? Start with how to calculate freelance taxes: what you owe, when it's due and how much of each payment to set aside. VAT-registered in the UK? Adding VAT to a price is one multiplication, and taking it back out is one division (by 1.2 at the 20% rate). Check the flat rate scheme before you join: since 2017, anyone who spends little on goods pays a 16.5% rate, so for most freelancers it doesn't pay.
AI subscriptions you use for work are usually deductible if you're self-employed. A $20-a-month plan saves roughly $60 to $85 a year in US federal tax (are AI subscriptions tax deductible?), and ChatGPT Plus saves a UK basic-rate taxpayer £62.40 a year (claiming ChatGPT in the UK). VAT is separate: if you're VAT registered, you account for it on your return through the reverse charge, as VAT on ChatGPT explains.
These posts explain the rules and show the math. They aren't personal tax advice, so check anything with real money at stake with an accountant or the tax authority.